How lawmakers beat the clock, and wound up with a budget and other needed legislation

Taxes going up for some, a little or a lot

Washington residents who consume their nicotine by vaping soon will be paying more taxes when they buy their products.

Drivers can expect to pay a bit more at the gas pump as the state shifts the way it collects a tax on on oil, shifting it from a percentage of the price of oil to $1.09 per barrel.

Some professional service companies like doctors, lawyers, accountants and architects will see a bump in their business and occupation tax bill, and tech companies a more significant increase.

Large international banks with offices in Washington will see a big increase with a doubling of their B&O tax.

Some out-of-state customers will pay sales tax when shopping at Washington stores. They’ll be able to file for a refund once a year if the tax they pay totals more than $25.

Home buyers might get a break or pay more, depending on the sale price. Buy a home for less than about $1,533,000 million and the new graduated Real Estate Excise Tax will save you some money; after that, it’ll cost you.

Those are among the tax changes that will help pay for the state’s new $52.4 billion two-year operating budget. Democrats approved the budget, and some of the taxes, shortly before midnight Sunday.

They argued the taxes shift the burden from low-income and middle class families to the wealthy, and to big corporations that have benefited from “windfall profits” through the tax cuts proposed by President Donald Trump.

Some are also targeted for specific programs. The higher B&O tax on service businesses will go into a special fund inside the operating budget for college financial aid and high-demand majors like computer science, engineering and nursing. It’s also the source of money for the expansion of classes at the Elson Floyd College of Medicine at Washington State University Spokane.

Republicans, however, argued those families will be hurt, from higher gasoline and energy prices to the increased costs of services that are passed through to them. Although credit unions and community banks are exempted from the doubling of the B&O tax, some financing requires the assets of the largest banks, and the high tax rate could cause some to leave Washington, opponents contend.

The real estate excise tax is currently 1.28% for all sales. If the new tax structure becomes law, it will drop to 1.1% for the first $500,000; remain at 1.28% for the amount of the sale between $500,000 through $1.5 million; go to 2.75% for sales between $1.5 million and $3 million; and to 3% for everything over $3 million. That means as the taxes are applied to different amounts in a seven-figure property sale, $1,532,727 is the point where the new tax collects more than the current tax.

With two hours to midnight and the statutory end of the regular session of the 2019 Legislature, the odds seemed better than even that lawmakers would miss that deadline and need a special session of hours or days to finish their work.

A $52.4 billion general operating budget had been negotiated, couldn’t be amended and had the support to pass the Democratic-controlled chambers if it could come to a vote.

Democrats were also confident they had the votes to pass some new or revised taxes to come up with the extra revenue to keep that budget in the black for the next four years.

But House Democrats and Senate Democrats couldn’t agree on one of the other controversial issues, how to revise property tax levy laws that had been changed just two years earlier as part of a massive revision of the way the state and local school districts share the cost of public education.

Property tax laws and school funding formulas are complicated, and there was no simple fix that would help all 295 school districts in the state equally. If a deal on all of those items hadn’t been reached in 104 days and 22 hours of a 105-day session, the prospects of reaching a deal and getting the political machinery up and running in the next two hours seemed dubious.

But it did. One bit of oil to get the machinery moving was a relatively obscure bill involving records from the recent bump-stock buy-back program.

Democrats reached a levy “deal” late in the evening that involved the higher levy rate for school districts the Senate side wanted and a better formula for alternative funding levels based on the number students in the district. They could put that deal on a levy bill on the docket in the House, but there was a problem.

That bill had 32 proposed amendments, one that would hold the Democrats’ negotiated agreement and 31 by Republicans, who couldn’t defeat the bill but could conceivably talk it so long there wouldn’t be time to do debate and pass the budget and other bills connected to it.

In exchange for withdrawing all of their amendments to the levy bill, Democrats agreed to support setting the rules aside to bring up a bill on blocking the release of names and addresses of people who turned in bump-stock devices to the state’s buy back program last month. Sen. Jim Honeyford, R-Sunnyside, had proposed such a bill over the weekend and the Senate approved it in a late night session, but rules required it would need to go to a House committee before coming to the floor.

House Republicans would drop all of their amendments to the levy bill if House Democrats would vote to suspend rules to allow Honeyford’s bill to come to the floor for a vote, amend it to make the exemption retroactive, and Senate Democrats would agree to approve the changes before midnight.

“They have the votes to pass this,” Rep. Drew Stokesbary, of Auburn, the ranking Republican on the House Appropriations Committee, said. “We can be obstructionists and go into special session or be the responsible ones.”

Republicans also got an addition to the levy bill that requires oversight to determine if local districts use money for their local levies for basic education expenses, such as salaries for teachers.

As the bump stock bill was starting in the House, the Senate would vote on the operating budget. Debate wouldn’t be limited, but it wouldn’t be protracted, either. The House would take up the levy bill while the Senate was voting on the budget. Each bill would move quickly across the Rotunda to be passed in the opposite chamber.

The Senate would then approve a new tax on nicotine vapor products modified by Sen. John Braun, R-Centralia, that would lower the proposed tax from what the House had approved just two days earlier on partisan vote, and direct some of it to a cancer research fund named for a popular Republican legislator, the late Sen. Andy Hill. The vape tax bill would then go back to the House for final passage.

When explained, it sounded a bit like a Rube Goldberg drawing. But it worked. The voting was done at about 11:45 p.m., the final gavel came down seconds before midnight and the Legislature finished a biennial budget writing session on time for the first time since 2009.

They had a $52.4 billion operating budget that will pay for most state programs, policies and salaries for the next two years. In a celebratory press conference afterward, Gov. Jay Inslee congratulated assembled Democrats for prioritizing education, making major changes to mental health, and addressing climate change.

“I could not be more pleased,” Inslee said as he gathered with Democratic members of both chambers in his conference room after the session was gavelled to a close.

Senate K-12 Education Committee Chairwoman Lisa Wellman, D-Mercer Island, had worked on the levy bill for the entire session, and said Senate Democrats were “extremely happy” with the way it turned out.

Senate Majority Leader Andy Billig, D-Spokane, said it will allow “local voters to invest in education.”

Critics, however, said it leaves out charter schools. They also said higher levies in some districts eventually will lead to the kind of inequities around the state that will spark more lawsuits.

“Remember this day, because we’re going to have to follow up and fix this someday,” Braun said before joining all Republicans in voting against the bill.

Rep. Timm Ormsby, the Spokane Democrat who heads the House Appropriations Committee, said Monday that the Washington education system that involves state funds for basic education services and local money for other programs is complicated to balance. But he disagrees with Braun and other Republicans who warned the changes the Legislature made will result in more lawsuits.

“I don’t think we’re going to be back in court,” Ormsby said, taking a break from cleaning off his desk on the floor of the House. “It is not a perfect solution. But this is a work in progress, and it’s always going to be a work in progress.”